Elders posts first-half underlying profit of $6.7m

Elders says the result represents an early milestone in the journey to becoming a value-generating investment for shareholders.
Photo: Bloomberg

by
Tim Binsted

Struggling rural services business
Elders
has swung back into the black on an underlying profit basis, with half-year profit excluding significant items swinging to $6.7 million from a $23.7 million loss a year ago.

The 175-year-old company has been battling for survival, divesting assets and slashing debt since the global financial crisis hit in 2008.

Elders chief executive Mark Allison said the result represents an early milestone in the journey to becoming a value-generating investment for shareholders.

“We’ve moved from incurring underlying losses to generating underlying profit and it is pleasing that every part of the business delivered improved results - in spite of variable seasonal conditions which included drought in much of north-eastern Australia," he said in a statement.

The loss compares with a $303.2 million statutory loss - driven by massive impairment charges - in the same period last year.

Significant items including a negative $20.4 million fair value readjustment to Elders’s investment in AWH and a $3.7million impairment to the company’s New Zealand Network contributed to the statutory loss.

Both the AWH investment and the New Zealand Network are assets held for sale.

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Net debt fell 25 per cent from a year ago to $236.6 million as at March 31, although the company’s market value is still sitting around $50 million.

EBIT improves

Revenue was steady at $655.2 million. Underlying earning before interest and tax was $12.4 million, up from a $16 million EBIT loss. Better performance in the livestock agency, real estate and live export trading business, contributed to the improved EBIT.

“On balance, seasonal and market conditions are encouraging. Recent rainfall has provided a good start to the winter cropping season...The second half outlook is positive, subject to seasonal conditions, and we expect ongoing improvement against last year’s results, Mr Allison said.

Mr Allison, who ousted Malcolm Jackman from the CEO position in November, was running the business as executive chairman while looking for a replacement CEO.

Josephine Rozman resigned from the board in late March, leaving Hutch Ranck (who subsequently became chairman in place of Mr Allison) and Mr Allison on the Elders board.

Two new directors were appointed on April 13. Mr Allison was appointed CEO on April 30.

Ms Rozman has declined to comment on reasons for her resignation but the improvement in Elders’s operating performance suggests her departure may have been related to governance concerns.

Elders shares, which are thinly traded, were up 2.2 per cent to 11.8¢ on Monday morning.

While Elders’ future is looking brighter than it has in the past five years, much depends on the company’s ability to conduct a capital raising and recapitalise its balance sheet.

Elders has not paid a distribution to its hybrid equity holders in years and the hybrids have a dividend stopper that prevents dividends being paid to normal shareholders in the event hybrids do not receive a distribution.

Rival Ruralco Holdings, which made a failed $250 million takeover play for Elders’ rural services business last year, owns 12 per cent of Elders.

To date Ruralco has not given any indication it intends to support a capital raising.